27th January 2018
Q: I am looking to buy a property with a sitting tenant, is that a good idea?
A: This is a great question, I often get asked this on the sourcing and investment side of the business. A sitting tenant is when a landlord buys a property from another landlord with a long-term tenant already in place. Landlords are doing this for better security as well as trying to boost their rental returns, in some locations particularly in London, yields are being squeezed while property prices continue to increase. I read recently somewhere that as much as 25% of properties bought by landlords in London had a sitting tenant. Are there any good or bad points to this?
It seems high numbers of landlords are seeing the value of adding occupied properties to their portfolio, housing long-term tenants on longer term contracts. The main reason that you would buy a property with a sitting tenant is to make sure your rental income comes in immediately, which is great in areas with lower rental yields. Landlords taking advantage of this trend will also benefit from a quicker route to portfolio, as they won’t have to undertake the tenant finding process.
As with anything there are risks and downsides. Firstly, you cannot choose your own tenants. You will also have to go on the selling landlord’s word when it comes to the quality of the tenants in residence, keeping in mind that they are likely to be keen to sell quickly. Landlords who carry out their own tenant referencing process may also not be able to vet their tenants to the detail they would prefer. You may also be stung as you are more than likely not be able to charge the monthly rent you want to if the sitting tenants were getting cheap or reduced rents from the previous landlord.
Targeting occupied properties certainly presents some food for thought for ambitious landlords. It has to be said that the majority of long-term tenants are just that for a reason. However, as with any investment purchase, detailed and thorough research will be the key to making it a successful and ultimately profitable investment.
If you have any questions about this situation, or any other rental question, then please feel free to contact me. If you are looking to grow your portfolio or reduce it, then please contact our office for a chat and free advice on how we can help.